EU set to pledge billions in support of 'top priority' North Sea supergrid

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A "supergrid” across the North Sea that could bring thousands of jobs to Scotland appeared a step closer last week after the EU energy commissioner said that European funds will be used to pump prime the project.

In what is Brussels' strongest statement of intention on the North Sea Electricity Grid project to date, Commissioner Miguel Arias Cañete has told the Scottish Tory MEP Ian Duncan, a member of the European Parliament's energy committee, that the building of the grid – which would be the world’s largest sub-sea electricity system – is now a "top priority" for the European Commission and that “it was now for member states and devolved administrations to work with the EU to make the grid a reality”.

Cañete said that the seed funding would come from Brussels' recently established €315 billion (£220bn) Investment Plan for Europe, to which the UK last week pledged £6bn. The bulk of the finance for the third of a trillion euro project is, however, required to come from the private sector.

Duncan, who described the project as “the most exciting project to hit the North Sea since the discovery of oil”, said that it would allow green energy to be transmitted from areas of high electricity production but relatively low demand to the more densely populated parts of Europe.

“Once this grid is built I think it will prove to be Scotland’s second North Sea revolution as Scotland will be right at the heart of it,” Duncan said. “It plays to Scotland’s strengths as we have all the skills and subsea expertise needed to build and maintain such a network.”

In 2009, nine countries bordering the North Sea committed to building the grid but the project has been effectively on the back burner since then pending negotiations between EU member states on new emissions targets for 2030.

With the 2030 target of a 40 per cent reduction in greenhouse gas emissions agreed last October, the Commission last week announced a consultation on its plans for an EU-wide energy union which aims to create a single European market for energy supplies, purchases and consumption in an attempt to loosen Russia’s grip on Europe’s energy needs.

The Netherlands, which takes over the revolving six-month presidency of the EU in January, has said that the grid project would be one of its presidency priorities, which makes Duncan hopeful that construction work on parts of the project could get under way within the next 18 months or so.

As Scotland’s renewable electricity generation industry continues to grow (half of the country’s electricity usage in 2014 came from renewable energy, according to figures published last month), the need to tackle the intermittency of production – caused by the variability of wind or solar strength – also grows and could lead to energy being wasted unless a commercially viable storage means can be found.

A North Sea grid would allow green energy produced in Scotland to be stored in Scandinavian pump storage hydro schemes until demand peaked elsewhere in Europe.

Although the total cost of building a North Sea grid is estimated at around €330bn (£230bn), analysts expect the amount to be recouped quickly. Investors in a recently-built subsea cable between the Netherlands and Norway recouped their money within just two years, as the cable began to be used to its maximum capacity almost as soon as it was built as Dutch energy distributors used it to import cheaper Norwegian hydro power.

Duncan says he expects that the North Sea grid will give potential investors in renewable energy projects in Scotland the confidence to proceed with projects such as the five proposed offshore wind farms off the east coast.

Final investment decisions on two of those projects (the 664MW Beatrice wind farm in the Moray Firth and the 450MW Neart Na Gaoithe project in the Outer Forth estuary) are expected to be made early next year.

There are already signs of investor appetite for bilateral cable projects. Last week the UK’s National Grid and Norway’s state grid company Statnett awarded £1.5bn in contracts to build the first electricity link between the UK and Norway.

At 459 miles, the 1.4GW North Sea Network (NSN) Link will run from Blyth in Northumberland to Rogaland and will be the world’s longest interconnector cable.

Earlier this year planning permission was sought for the first interconnector between Scotland and Norway, the 1.4GW NorthConnect cable, which will run from Peterhead to the west coast of Norway and will cost around £1.7bn, for which funding will come almost entirely from the private sector.

But the proposed supergrid will require more cables to be laid across the North Sea and the building up of a “hub” in the centre of the sea with links to Norway, Denmark, Germany, Holland, Belgium and France.

Aside from the potential jobs bonanza for Scotland, another of the main beneficiaries of the North Sea grid is expected be the UK electricity consumer. The wholesale price of electricity in the UK is currently the highest in Europe, while Norway – where almost all electricity is produced from renewable sources – has the lowest wholesale prices.

Last week spot prices for electricity in Norway were €10 per megawatt as against €58 in the UK and analysts calculate that connections between the two countries will lead to a reduction in the wholesale price of electricity in the UK of at least €3 per megawatt.

Adam Bruce of Mainstream Renewable Power, the developer of the Neart na Gaoithe offshore wind farm, said Scotland and the UK’s renewables energy sector would be in a “far stronger position” with a North Sea electricity grid in place.

The eventual building of a larger EU-wide grid would, said Bruce, allow the peaks and troughs of green energy production throughout Europe to be evened out across different time zones, allowing solar energy from the Mediterranean countries to compensate for low wind days in northern Europe, or vice versa, and would allow base load of nuclear or coal-fired energy to be reduced across the continent.

“The wider the grid the more efficient it becomes,” he said. “Interconnector infrastructure is a remarkably attractive proposition for investors as it generates long cash flows so I do not think that raising capital for the North Sea grid will be a problem.”

A spokesman for the Scottish Government said: “We are working closely with the UK and other EU countries on the development of grid in the North Seas and the potential for Scottish renewables to be connected to an integrated European grid.

“In partnership with the Irish Government and Northern Ireland Executive, we lead the Irish Scottish Links on Energy Study which looks to progress an offshore electricity network, further reduce regulatory barriers, explore market mechanisms and align and establish joint planning and environmental consenting provisions."

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